What was the allowance for credit losses related to Aerus' notes receivable in 2024?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | |
|---|---|---|
| Notes receivable | $710,241 | $701,476 |
| Less allowance for credit losses | (677,266) | (570,045) |
| Notes receivable, net | 32,975 | 131,431 |
| Less current portion of notes receivable | (30,000) | (40,000) |
| Long-term portion of notes receivable | $2,975 | $91,431 |
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus' 2025 Franchise Disclosure Document, the allowance for credit losses related to notes receivable in 2024 was $677,266. This figure represents the company's estimate of the portion of its notes receivable that may not be collectible. Notes receivable from franchisees relates to sales of franchise rights to the Company's branch locations and certain branch assets to franchisees. The notes receivable from franchisees typically bear interest from 7-10% per annum, have original terms of three to five years, and are unsecured.
The allowance for credit losses is a contra-asset account that reduces the gross amount of notes receivable to the net realizable value, which is the amount Aerus expects to actually collect. This allowance is based on factors such as the creditworthiness of the franchisees, historical collection experience, and current economic conditions. A higher allowance for credit losses suggests a greater risk that Aerus will not collect the full amount of its outstanding notes receivable.
For a prospective franchisee, this information is relevant because it provides insight into the financial health of Aerus and its franchisees. A significant allowance for credit losses could indicate that some franchisees are struggling to meet their financial obligations, which could impact the overall stability of the franchise system. It is important to note that these are unaudited financial statements.